Business

Mathematics
Quarter 2: Module 1
 Target

Imagine if your ancestor from Italy bequeathed you an active account from a bank
dates 1472. Imagine also that account started with one pound (£1) with no
withdrawals or additional deposits made until today. Assume the depositors in this
type of account earn a 3% interest compounded annually. Did you know that if all
these imaginations and assumptions are true, you are now a millionaire? You can
now withdraw a total of £9,626,097! In the Philippines, that’s almost ₱700,000,000!
And yes, it started with £1! That’s what you call the power of compounding.

Investing money with interest will let you earn over time. All you have to do is to wait
until such time when you can already withdraw. In life, this is the same as investing
goodness on other people. The kindness you share will always be reciprocated upon
you in God’s time. Just like interest, it may also take time before you feel your
earnings. In fact, you will learn in this unit that the longer the time you wait, the
higher earnings you will receive. The kindness you give today might take a very long
time to return to you. Maybe not in your lifetime, but to your child’s or grandchild’s.
One thing is for sure: It will be reciprocated upon you.

After going through this learning material, you are expected to:

1. Illustrate the different types of commissions

❖ Define commission
❖ Differentiate the types of commission
❖ Provide real life examples for each type of commission.
2. Compute commissions on cash basis and commission on instalment
basis (ABM_BM11B S-IIa-11)
❖ Define commissions on cash basis and instalment basis.
❖ Differentiate commission on cash and instalment basis.
❖ Solve problems involving commission on cash and instalment basis
3. Compute down payment, gross balance and current increased balance
(ABM_BM11B S-IIa-12)
❖ Define down payment, gross balance and current increased balance.
❖ Differentiate down payment, gross balance and current increased
balance.
❖ Solve problems involving down payment, gross balance and current
increased balance.

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Lesson
Commissions

Jumpstart

For you to understand the lesson well, do the following activities. Have fun
and good luck!

Activity 1. TRUE/ FALSE.

Directions: Read each statement below carefully. Write “T” if the statements
are true, and “F” if the statements are false. Write your answers in a
separate sheet of paper.

1. If an employee only receives a percentage of the sales made with no additional

compensation given then, he is receiving a straight commission.
2. If an employee receives a guaranteed base salary amount and earn an undefined
amount of commission based on the amount of sales he makes, then he is
receiving a graduated commission.
3. Salary plus commission is earned as a percentage of sales that as volume of sales
increases, the amount of commission also increases.
4. The price of a house for sale is ₱5,000,000. The bank requires 15% down
payment. If a buyer wants to buy the house, then he needs to pay ₱1,125,000 as
down payment.
5. A car is valued at ₱2,000,000 and the required down payment is ₱500,000. The
down payment in percentage form is 25%.
6. A salesperson is receiving a commission of 12% on all of his sales. If he was able
sell goods amounting to ₱50,000, his total commission is ₱6,000?
7. A salesperson is paid in installment basis. Assuming that he was able to sell a
total cost of ₱320,000 which will be paid in installments of ₱5,000 monthly with
a commission of 5%. At the end of the payment term, he will be able to receive a
total commission of ₱14,000.
8. Charlie is a sales engineer receiving a basic monthly compensation of ₱13,500
and 1% commission on all sales. He will receive ₱14,745.8 gross earnings for the
month if he will be able to sell ₱124,580.
9. A golden bejeweled necklace was sold at ₱650,000 and will be paid in monthly
installments of ₱65,000. If the salesperson gets a 3% monthly commission, then
he will receive ₱1,950.
10. Hazel receives 20% commission on the appliances she sells. If she sells a water
heater for ₱1,500, a flat iron for ₱1,200 and a refrigerator for ₱20,000, then she’ll
receive ₱5,450 as a commission.

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Activity 2: Search me up!

Directions: Search for the words that are related to commissions and interests in
the given puzzle below. Each word corresponds to 2 points. Good luck and enjoy!

E L B A I R A V

B A F I X E D P

K L G P W V R L

C F X S E D J U

T H G I A R T S

Y A C O D N A E

H T M B U Z I Q

C O N S T A N T

Discover

In 2006, the real life-based film Pursuit of Happiness featuring Will and Jaden Smith
inspired many people because of its storyline and how the main protagonist
succeeded from rags to riches. In the film, Chris Gardner (played by Will Smith), a
homeless salesman, struggled daily for shelter for him and his son Christopher Jr.
(played by Jaden Smith). Chris hardly sold bone density scanners for a living. There
were even times when they had to spend the night in a restroom in a railway station.
Until one day, Chris was able to secure a position in a brokerage firm because of his
determination, wit, and diligence. Eventually, Chris founded his own firm and made
millions through brokerage.
In a brokerage firm, agents make money out of commissions. More often than not,
commissions are percentages based on the net sales – that is, higher sales mean
higher commission. The computation of commission is commonly used in payrolls of
salespeople. Note that the process and rates of computation may differ from one
company to another. Varied examples will be discussed as an attempt to cover the
common practices of companies in paying commissions to their employees.
Commissions are computed as a portion of the net sales. Some companies pay their
salespeople based on straight commissions. The pay of these salespeople is entirely
based on the amount of their sales. No sales means no pay. Other companies pay
their salespeople with fixed salary plus commission. Commission rates may be
constant for all sales amounts or it may be a variable scaled on the amount of sales.

There are some instances where the sales will be closed by outright cash or by
installment. Some companies disregard whether the sales are closed on cash basis
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or installment, while some consider this in paying their employees. For example, if
the sales are made on installment, the salesperson responsible for the sale will have
to wait first for the partial payments before receiving the commission (to be received
in partial payment also). While some companies will still give the whole commission
to the salesperson who made the sale, regardless of whether it is closed by cash or
on installment. A common practice of companies is to pay their salespersons
appropriate commissions every end of the month for all sales closed within the
month.

Some companies make an effort to impose regular commission paydays by holding

commission pays until a designated date in releasing all commissions. For example,
a company has set some dates in April and November as paydays for all accumulated
commissions of a salesperson.

Types of Commissions

1. Straight commission – This is given when a person is paid a percentage (%)

of sales only.

Examples:

a) A stock broker receives a commission of 7% for selling annuities to her clients.

If she sells ₱250,000, how much commission will she earn?

Solution: Since the stock broker receives 7% commission based on sales, she’ll earn:
250,000 0.07 = 17,500
Thus, the stock broker will earn ₱17,500 commission.

b) . Harry receives 30% commission on the appliances he sells. If he sells a TV

for ₱17,000, a refrigerator for ₱20,000 and a heater for ₱22,000, how much
does Harry make in commission?

Solution: Since Harry receives 30% commission based on sales, he’ll earn:
(17,000 + 20,000 + 22,000) .3 = 17,700
Thus, the Harry will earn ₱17,700 commission.

2. Salary plus commission – This is exactly as it sounds, a person gets paid a

salary and a % of sales.

Examples:

a) Christian works as a sales agent for a company and earns a basic monthly
salary of ₱8,000 plus 5% commission on all his sales. If he made total sales
of ₱50,000 for the month, how much is his gross pay for the month?

Solution:

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 ₱50,000 .05 = ₱2,500
₱2,500(commission) + ₱8,000(salary) = ₱10,500
Thus, the Christian will earn ₱10,500 salary and commission.

b) Harry decides to work for another company that will pay him ₱17,500 per
week and 6% of any sales above ₱150,000. If he sold goods worth ₱284,400,
what is his gross pay?

Solution: ₱284,400 – ₱150,000 = ₱134,400

₱134,400 0.06 = ₱8,064 (Commission)
₱8,064(commission) + ₱17,500(salary) = ₱25,564

3. Graduated Commission – This is when percentage (%) changes based on how

much someone sells

Examples:

a) Steve works for a company that pays him 1% on the first ₱250,000 sold, 2%
on the next ₱750,000 and 3% on all sales over ₱1,000,000. What is his gross
pay if he sells ₱1,250,000?

Solution: ₱250,000 0.01 = ₱2,500

₱1,250,000 – ₱250,000 = ₱1,000,000

₱750,000 0.02 = ₱15,000

₱1,000,000 – ₱750,000 = ₱250,000

₱250,000 0.03 = ₱7,500

Total: ₱2,500 + ₱15,000 + ₱7,500 = ₱25,000

Thus, Steve will receive a total of ₱25,000 as his commission.

a) Ana, the assistant manager of a clothing store earns a salary of ₱17,500 per
month. She also receives a 5% commission on the first ₱450,000 she sells,
and 6% commission on sales above ₱450,000. If Ana sold ₱850,000 worth of
clothes last month, what was her total pay?

Solution: ₱450,000 × 0.05 = ₱22,500 (first commission)

₱850,000 – ₱450,000 = ₱400,000

₱400,000 × 0.06 = ₱24,000 (second commission)

₱22,500 + ₱24,000 = ₱46,500 (first + second commission)
₱46,500 + ₱17,500 = ₱64,000 (total commission plus salary)
Ana earned a total of ₱64,000 last month.
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Cash vs. Installment
a. Computing Commissions on Cash Basis – This type of commission is
similar to computing straight commissions.
Example 1:
Kevin works at Luna’s watch store. For every cash purchase of a watch, he gets 6.1%
commission. In a particular month, he was able to sell 10 watches costing ₱8,000
each. How much was his total commission for such cash sales?
Solution:
Total Sales = ₱18,000/watch × 10 watches = ₱180,000 Cash
commission = ₱180,000 × 6.1% = 180,000 × 0.061 = 10,980
Thus, Kevin’s total commission is ₱10,980.

b. Commission on Installment Basis – commission is computed based on

partial payments upon the agreed installment method.

Example 2:
At Luna’s store, some items are paid on installment basis through credit cards. Kevin
was able to sell 10 watches costing ₱18,000 each. Each transaction is payable in 6
months divided into 6 equal installments without interest. Kevin gets 2% commission
on the first month for each of the 10 watches. Commission decreases by 0.3% every
month thereafter and computed on the outstanding balance for the month. How
much commission does Mike receive on the first month? On the second month?
Third? Fourth? Fifth? Sixth month? At the end of installment period, how much will
be his total commission?

Solution:
First month commission: ₱18,000/watch × 10 watches × 0.02 = ₱3,600
Second month commission: ₱15,000/watch × 10 watches × (0.02 – 0.003)
= ₱2,550
Third month commission: ₱12,000/watch 10 watches (0.017 – 0.003)
=₱1,680
Fourth month commission: ₱9,000/watch 10 watches (0.014 – 0.003)
=₱990
Fifth month commission: ₱6,000/watch 10 watches (0.011 – 0.003)
=₱480
Sixth month commission: ₱3,000/watch 10 watches (0.008 – 0.003)
=₱150
His total commission for six months is:
₱2,550 + ₱1,680 + ₱990 + ₱480 + ₱150 = ₱9,450.

Note: The base price of the watch is subtracted by 3,000 for each month since it was
stated in the problem that the price is will be paid in 6 equal payments. Thus
18,000/6 = 3,000.

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THE DOWN PAYMENT
Down payment is an initial payment made when something is bought on credit. The
down payment is a first payment that one makes when one buys something with an
agreement to pay the rest later.

How do we obtain the down payment?

Example#1:

When one purchases a car or any big item not through cash but installment terms,
normally, a certain down payment is required of the buyer. Car dealers normally
require a minimum down payment, which is usually 20% of the total cost of the
vehicle purchased. The interest on the remaining balance is then computed
depending on the number of years a buyer would want to amortize the remaining
balance. If a car costs ₱1,000,000 and a minimum 20% down payment is required
by the company, then the buyer will have an initial cash out of ₱200,000; that is,
0.20 1,000,000 = 200,000. The remaining ₱800,000 will be amortized monthly and
the amount of monthly amortization depends on the number of years the buyer will
want to pay the loan. Normally, buyers prefer a 3-year or 5-year payment period. The
lesser the number of years, the lesser the total amount paid as interest to the loan.
But with this arrangement, the monthly amortization will be considerably higher
than when one chooses to pay the balance for longer number of years.

Example#2:

Companies selling houses or condo units lure buyers by stating that no down
payment is required but only a certain amount of reservation fee. The reservation fee
paid is deductible when the buyer decides to proceed with the purchase. Otherwise,
it will be forfeited in favor of the company. After the reservation fee has been paid,
the buyer is told to pay the monthly amortization. For instance, ₱10,000 per month
for two years without interest. At the end of two years, the remaining balance will
now be subjected to an interest either through in-house or bank financing.

GROSS BALANCE

This refers to the total amount of money a bank has on deposit before adjusting for
uncleared checks or deposits, as well as reserve requirements. That is, the book
balance is a measure of what the bank has on hand before adding or subtracting
regulatory obligations and items that will soon appear on its books. This is the term
used by banks to describe the amount of money available before any adjustments is
made for deposits in transit, checks that have not been cleared, and reserve
requirements and interest received from “float funds”.

Example:
A simple case of gross balance refers to what is readily available for you to use based
on your bank deposits. For example, a check amounting to Php5,000 that has been
deposited today may not be withdrawn the next day because it has not cleared yet.
If your bank passbook currently contains ₱30,000, you may not be able to withdraw
the whole amount yet because your gross balance is only ₱25,000 since your check
has not been cleared yet.

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CURRENT INCREASED BALANCE
This refers to the total amount you have to pay that includes penalties or interest
incurred by unpaid balance from a loan or payment you are supposed to have made
but was not able to do so on time.

Example:
As of this month’s cut-off date, the current total amount due from your purchases
using your credit card is ₱99,386.59. The minimum required payment is 5% of the
total amount due. If you pay only the minimum required payment, a financing charge
of 3.4% of the remaining balance will be charged to the next bill. Assuming you
refrain from using your credit card on any of your purchases for the next 3 months
and the financing charge of 3.4% is applied every billing period, show your expected
monthly bill for the next 3 months.

Solution:
Given the current bill of ₱99,386.59, the minimum required payment is
0.05(99,386.59) = ₱4,969.33. If only the minimum required payment is paid, then
the remaining debt balance is 99,386.59 – 4,969.33 = ₱94,417.26. Assuming there
is no credit bill transactions for the next 3 months and the only minimum required
payment each month is paid, the table below shows the monthly total amount due
for each of the next 3 months.
Time Total amount due for the month Minimum required
t(months) payment for the month
0 99,386.59 0.05(99,386.59)
= 4,969.33
1 (99,386.59 – 4,969.33) + .034(99,386.59 – 0.05(97,627.45)
4,969.33) = 4,881.37
= 94,417.26 + .034(94,417.26)
= 1.034(94,417.26)
=97,627.45
2 1.034(97,627.45 – 4,881.37) 0.05(95,899.45)
= 1.034(92,746.08) = 4,794.97
=95,899.45
3 1.034(95,899.45 – 4,794.97) 0.05(94,202.03)
= 1.034(91,104.48) = 4,710.10
= 94,202.03

Observe that for the next 3 months, a total of ₱14,386.44 has already been paid
for the credit card bills. However, only ₱5,184.56 (99,386.59 – 94,202.03) has been
deducted so far from the original debt of ₱99,386.59. Hence, every time we keep
paying only the required minimum payment, more money goes to interest payments
rather than payment of the actual debt.

From the above example, your minimum required payment of ₱4,969.33 serves as
your down payment for your loan of ₱99,386.59 leaving you with a balance of
₱94,417.26 at the start of the month. However, because there is a finance charge of
3.4%, if you are not able to pay for the next month, your current increased balance
will become ₱97,627.45

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 Explore

Here’s an enrichment activity for you to work on to master and strengthen

the basic concepts you have learned from this lesson.

Activity 1

Directions: Using your own words, illustrate the three types of commissions and
give one real life example for each type. Use the box provided below. Write your
answers legibly.

Straight Commission Commission plus Salary Graduated Commission

Activity 2

Directions: Solve for what is being asked on each of the given problem Show your
complete solution.

1. If a car selling company asked for ₱240,000 as down payment for a ₱1.2 million
worth car, how many percent was the down payment?

2. Ryan is a broker who earns commission of 3 % on all securities sales that he

makes. For the past year, he closed sales totaling ₱928,867. Find the amount of
commission he earned for the year
3. Dan is a sales representative receiving an annual salary of ₱120,000 plus
commission on all his sales above quota of ₱25,000 in accordance with the
following schedule:

First ₱30,000 above quota - %

Next ₱50,000 - 1%
Next ₱70,000 - 2%
Over ₱150,000 - 3%

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 Compute for his gross earnings if his sales for the month:
a. ₱37,900
b. ₱58,200
c. ₱92,300

Deepen

At this point, describe a story, movie or a book where you’ve seen or read the
application of commission. Put the title of the story or movie that you’ve read and
explain in detail how commission was used in the whole story. Relate this story in
real life situation. You may use the given example in the first part of this module as
your reference. A rubric will be used to grade your works objectively.

Rubrics for Scoring the Output

CATEGORY Excellent Very Good 4 Good Fair 2

5 points points 3 points points
Content Covers topic Includes Includes Content is
in-depth with essential essential minimal or
details and knowledge information there are
examples. about the about the several
Subject topic. Subject topic but factual errors.
knowledge is knowledge there are 1-2
excellent appears to be factual errors.
good.
Story used The story used The story The story The story
is clear, used is clear, used is used is
well-detailed with sufficient slightly clear, unclear, with
and details and with minimal minimal to no
explained. explanation details and details and
explanation. explanation.
Understanding Demonstrates Shows Shows Little to no
/ deep understandin shallow demonstratio
Application understandin g of lesson understandin n of
g of lesson and ideas g of lesson understandin
and ideas applied to and ideas g of the
applied to analysis of applied to lesson.
analysis of case analysis of
case situations. case
situations situations.
Grammar and No Minimal Frequent Major
mechanics misspellings misspellings misspellings misspellings
or and/or and/or or
grammatical mechanical grammatical grammatical
errors. errors. errors. errors.

10
 Gauge

Assessment 1

Directions: Read and analyze the given scenario below. Answer the question given
and provide reasons why. Answers should not exceed to 5 sentences. Write your
answers legibly.

Julius resigned from his job out of boredom and took a new job as a sales
representative. Believing that he will enjoy more in this new job, he didn’t really
mind what he will get. The following are the options he was offered:
1. His pay would be through straight commission basis.
2. He gets a fixed base salary plus a commission.
3. He gets paid through graduated commission.
4. He gets paid on commission by installment basis.

Rubrics for Scoring the Output

CATEGORY Excellent 5 Very Good Good Fair 2

points 4 points 3 points points
Perspective Articulates a Articulates a Your position is Your position is
forceful clear position underdeveloped underdeveloped
position that is that is argued or unfocused and confusing
convincingly throughout through the points through
argued the answer to paper. the paper.
through the the aim
answer and question and
relevant to the is relevant to
topic. the topic.
Evidence Persuasively Supports Supports Position is
supports the position with position with supported with
perspective developed underdeveloped no relevant
with reasons using reasons using evidence
welldeveloped evidence. little evidence.
reasons using
evidence and
examples
Analysis The evidence is Contains a Weak or no No visible
critically visible visible analysis analysis on how
analyzed for its analysis of on how the the evidence
relevance to the how the evidence supports the
original evidence supports the original
perspective supports the original perspective
original perspective.
perspective.

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 Organization Uses an Organizes Some No organization
entirely ideas to build organization of of ideas to build
appropriate an argument ideas to build an an argument
language style through argument
for a formal logical through logical through logical
essay. Only one structure and structure. structure.
or two errors in logical flow of
punctuation, ideas.
grammar, and
spelling appear
in the essay.

Assessment 2.
Directions: Read each item carefully. Use separate sheet for your answers. Write the
letter of the best answer for each test item.

1. If an employee only receives a percentage of the sales made with no

additional compensation given, what type of commission is he receiving?
A. Down payment
B. Straight commission
C. Graduated commission
D. Salary plus commission

2. If an employee receives a guaranteed base salary amount and earn an

undefined amount of commission based on the amount of sales he makes,
what type of commission is he receiving
A. Down payment
B. Straight commission
C. Graduated commission
D. Salary plus commission

3. What type of commission is earned as a percentage of sales that as volume

of sales increases, the amount of commission also increases.
A. Down payment
B. Straight commission
C. Graduated commission
D. Salary plus commission

4. The price of a house for sale is ₱7,500,000. The bank requires 15%
down payment. How much should a buyer pay for the down
payment?
A. ₱1,125,000
B. ₱2,500,000
C. ₱5,125,000
D. ₱6,375,000

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5. A car is valued at ₱1,800,000 and the required down payment is
₱450,000. How much is the down payment for the car in percentage
form?
A. 10%
B. 15%
C. 20%
D. 25%

6. A salesperson is receiving a commission of 8% on all of his sales. If he

was able sell goods amounting to ₱250,000, how much is his
commission?
A. ₱8,000
B. ₱18,000
C. ₱20,000
D. ₱25,000

7. A salesperson is paid in installment basis. Assuming that he was able

to sell a total cost of ₱120,000 which will be paid in installments of
₱10,000 monthly with a commission of 3%. How much will he be
earning at the end of one year?
A. ₱300
B. ₱360
C. ₱3,000
D. ₱3,600

8. Robert is a sales engineer receiving a basic monthly compensation of

₱13,500 and 1% commission on all sales. How much is his gross
earnings for the month if he sold ₱124,580?
A. ₱14,745.8
B. ₱14,875.4
C. ₱17,445.8
D. ₱17,475.8

9. A high-end bag was sold at ₱435,000 which will be paid in monthly

installments of ₱36,250. If the salesperson gets a 2% monthly
commission, how much commission will he be earning monthly?
A. ₱275
B. ₱525
C. ₱725
D. ₱1,225

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10. Irene receives 25% commission on the appliances she sells. If she
sells a rice cooker for ₱2,500, a hair blower for ₱1,900 and a washing
machine for ₱23,000, how much does Irene make in commission?
A. ₱5,860
B. ₱6,580
C. ₱6,850
D. ₱8,650

Great job! You are done with this module.

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